For Toni Sacconaghi, A stands for Apple and Ambivalence

"The upshot is that we believe consensus estimates are too high for FY 23, though we struggle in gaining conviction on the magnitude and exact timing of shortfalls."

From a note to Bernstein clients that landed on my desktop Tuesday:

Modeling AAPL's FY Q1 and 2023 estimates is trickier than usual due to a number of factors: (1) Production delays in China (how big? any pushouts?); (2) a 14 week quarter in FY Q1 distorting seasonality; (3) A sudden weakening of the US $ (which should add $12B to FY 23 reported revenues vs. 90 days ago); (4) Gross margins, given a seeming mix shift to iPhone Pro; and (5) Overall demand amid an uncertain economic backdrop.

All that said, our fundamental call is that we believe that demand for iPhones will decline this FY (to ~220M units) - following two strong years - and that Macs and iPads may have been Covid beneficiaries. The upshot is that we believe consensus estimates are too high for FY 23, though we struggle in gaining conviction on the magnitude and exact timing of shortfalls given the aforementioned considerations.

We have tweaked our estimates for FY 23 (across quarters) but remain slightly above consensus for Q1 but below for the full year...

We are ambivalent on the stock and ultimately see risk-reward on AAPL as neutral to slightly negative. On one hand, we worry that (1) Apple was a Covid beneficiary, with lower growth likely over the next few years; (2) that 2023 numbers are too high and need to be revised down; and (3) that AAPL's valuation appears full. On the other, amid low expectations, the setup is potentially favorable and Apple may have permanently re-rated.

Maintains Market-Perform rating and $125 price target.

My take: Struggling to gain conviction. That's our Toni.